Investments in Pharmaceuticals Before and after Trips

45 Pages Posted: 19 May 2011

See all articles by Margaret Kyle

Margaret Kyle

University of Toulouse 1 - Toulouse School of Economics (TSE)

Anita M. McGahan

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 2011

Abstract

This paper addresses the relationship between patent protection and investment in the development of new pharmaceutical treatments. The TRIPS Agreement, which specifies minimum levels of intellectual property protection for countries in the World Trade Organization, has increased levels of patent protection around the world. Since patents also have the potential to reduce access to treatments through higher prices, it is imperative to assess whether wider use of patents has led to off-setting benefits, such as research on diseases that particularly affect the poor. Using variation across countries in the timing of patent laws and the severity of disease, we test the hypothesis that increased patent protection results in greater drug development effort. We find that patent protection in high income countries is associated with increases in research and development (R&D) effort; in other words, patent protection works in high-income countries to induce R&D. However, the introduction of patents in developing countries has not been followed by greater R&D investment in the diseases that are most prevalent there. Our results suggest that alternative mechanisms for inducing R&D may be more appropriate than patents for the "neglected" diseases that are concentrated in low-income countries.

Keywords: health, innovation, Intellectual property, pharmaceuticals, trade policy

JEL Classification: D22, F13, I11, L65

Suggested Citation

Kyle, Margaret and McGahan, Anita M., Investments in Pharmaceuticals Before and after Trips (May 2011). CEPR Discussion Paper No. DP8371, Available at SSRN: https://ssrn.com/abstract=1846253

Margaret Kyle (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Anita M. McGahan

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-6188 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
868
PlumX Metrics